Fiscal first quarters start February 1 and end April 30. Source: Company reports/Fung Global Retail & Technology

1Q17 RESULTS

Madrid-listed apparel giant Inditex reported fiscal 1Q17 revenue of €4.9 billion, up 11.5% year over year and above the consensus estimate of €4.8 billion. The company reported 17% growth in revenue on a currency-neutral basis. Group revenue growth was driven by positive comparable sales growth in all geographies. Operating earnings increased by 6.2%, to €705.0 million, above the consensus of €696.5 million. Net income (GAAP) increased by 6.3%, to €554.0 million, above the consensus of €544.6 million. EPS was €0.18, an increase of 5.9% versus 1Q16 and in line with consensus. Tight control of operating expenses also contributed to the results. In 1Q17, the company’s operating ratio decreased by 40 basis points compared to 1Q16, falling to 38.5%. Management commented that thanks to the group’s strong growth, Inditex is able to generate jobs in all its markets, most notably in Spain. During the quarter, Inditex continued to expand its store network, online presence and multi-channel model. During the period, the group opened its first stores in two new markets, Aruba and Nicaragua. Other notable store openings include Zara in SoHo, New York; Pull&Bear’s debut in Luxembourg; the first Zara Home stores in South Africa and Serbia; and the Stradivarius flagship store in Amsterdam. At the end of 1Q17, the group had 7,085 physical stores, having opened a net 72 stores in 31 markets, expanding its reach to a total of 90 markets. Inditex also expanded its online retail operations during the quarter by launching e-commerce platforms in Bulgaria, Croatia, Slovakia, Slovenia, Estonia, Finland, Hungary, Latvia, Lithuania, Malta and the Czech Republic. By the end of the quarter, Inditex had an e-commerce presence in a total of 39 markets worldwide.

GUIDANCE

Revenues and the store network are continuing to expand in 2Q17. Inditex reported that sales at the start of 2Q17—for the period of May 1, 2016–June 13, 2016—rose by 15%. During the period, the group opened its largest-ever Stradivarius store in Oxford Street, London; entered Paraguay with the openings of Zara and Zara Home stores there; and launched Massimo Dutti in India. For 2Q17, analysts expect Inditex revenues to be up 9.8%, to €5.5 billion; operating earnings to rise by 4.8%, to €864.5 million; and net income (GAAP) to rise by 4.2%, to €672.0 million.